An Investor Is Keeping a Careful Eye on the Real

question 49

Short Answer

An investor is keeping a careful eye on the real estate markets in Las Vegas and the Inland Empire. The following are her predictions for the real estate market in 2016.
• With 0.32 probability, foreclosures will increase in Las Vegas.
• With 0.46 probability, foreclosures will increase in Las Vegas or the Inland Empire.
• With 0.27 probability, foreclosures will increase in Las Vegas and the Inland Empire.
What is the probability that foreclosures will increase in the Inland Empire?

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Definitions:

Joint Cost Function

A cost function that describes the total cost of producing multiple products together, where the costs cannot be separated for each product.

Economies of Scope

Cost advantages that enterprises obtain due to a broad scope of operations or the variety of products and services offered.

Cost Function

A mathematical relation that describes how the total cost of producing a good or service varies with the level of output.

Diseconomies of Scope

The phenomenon where a company’s costs increase as it produces more varied types of products or services, due to inefficiencies.